##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period FromTo
 Commission File Number 333-150888
 T3 MOTION, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of incorporation or organization)
    
    20-4987549
(I.R.S. Employer Identification No.)2990 Airway Avenue, Suite ACosta Mesa, California
(Address of principal executive offices)
    
    92626
(Zip Code)
 (714) 619-3600
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



T3 MOTION, INC.  INDEX TO FORM 10-Q  September 30, 2009
 PagePART I. FINANCIAL INFORMATIONItem 1.Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (unaudited)
    
    
    5Notes to the Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4T. Controls and Procedures
    
    
    26PART II. OTHER INFORMATION
    
    
    27Item 1.Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults upon Senior Securities
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    30SignaturesEX-3.4EX-3.5EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    264,717
    
    
    $
    1,682,741Accounts receivable, net of reserves of $37,000 and $27,000, respectively
    
    
    938,381
    
    
    
    1,447,004Related party receivable
    
    
    28,902
    
    
    
    33,248Inventories
    
    
    1,001,226
    
    
    
    1,814,469Prepaid expenses and other current assets
    
    
    581,006
    
    
    
    612,795Total current assets
    
    
    2,814,232
    
    
    
    5,590,257Property and equipment, net
    
    
    933,651
    
    
    
    1,197,170Intangible assets, net
    
    
    625,000
    
    
    
    625,000Deposits
    
    
    495,647
    
    
    
    491,761Total assets
    
    $
    4,868,530
    
    
    $
    7,904,188LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCurrent liabilities:Accounts payable
    
    $
    1,983,077
    
    
    $
    2,381,487Accrued expenses
    
    
    944,478
    
    
    
    785,494Related party payables
    
    
    324,648
    
    
    
    2,034,734Note payable
    
    
    199,829
    
    
    
    Deposit for preferred stock subscription
    
    
    1,250,000
    
    
    
    Derivative liabilities
    
    
    2,841,785
    
    
    
    Related party notes payable, net of debt discounts
    
    
    3,370,485
    
    
    
    986,598Total current liabilities
    
    
    10,914,302
    
    
    
    6,188,313Long-term liabilities:Related party note payable
    
    
    
    
    
    
    1,000,000Total liabilities
    
    
    10,914,302
    
    
    
    7,188,313Commitments and contingenciesCommon stock, $0.001 par value; 100,000,000 shares authorized; 44,563,460
(unaudited) and 43,592,428 shares issued and outstanding, respectively
    
    
    44,564
    
    
    
    43,593Additional paid-in capital
    
    
    23,906,468
    
    
    
    25,043,452Accumulated deficit
    
    
    (29,998,286
    )
    
    
    (24,375,827
    )Accumulated other comprehensive income
    
    
    1,482
    
    
    
    4,657Total stockholders (deficit) equity
    
    
    (6,045,772
    )
    
    
    715,875Total liabilities and stockholders (deficit) equity
    
    $
    4,868,530
    
    
    $
    7,904,188
 See accompanying notes to condensed consolidated financial statements
 3




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T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
 COMPREHENSIVE LOSS (UNAUDITED)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenues
    
    $
    1,165,859
    
    
    $
    2,234,939
    
    
    $
    3,408,826
    
    
    $
    5,647,734Cost of revenues
    
    
    1,224,988
    
    
    
    2,475,956
    
    
    
    3,947,002
    
    
    
    7,046,001Gross loss
    
    
    (59,129
    )
    
    
    (241,017
    )
    
    
    (538,176
    )
    
    
    (1,398,267
    )Operating Expenses:Sales and marketing
    
    
    486,127
    
    
    
    669,861
    
    
    
    1,483,281
    
    
    
    1,657,060Research and development
    
    
    364,258
    
    
    
    417,875
    
    
    
    963,119
    
    
    
    1,021,894General and administrative
    
    
    1,119,985
    
    
    
    1,280,829
    
    
    
    3,460,171
    
    
    
    3,633,825Total operating expenses
    
    
    1,970,370
    
    
    
    2,368,565
    
    
    
    5,906,571
    
    
    
    6,312,779Loss from operations
    
    
    (2,029,499
    )
    
    
    (2,609,582
    )
    
    
    (6,444,747
    )
    
    
    (7,711,046
    )Other income (expense):Interest income
    
    
    5
    
    
    
    7,144
    
    
    
    2,490
    
    
    
    54,824Other income (expense), net
    
    
    633,985
    
    
    
    1,506
    
    
    
    4,862,922
    
    
    
    (31
    )Interest expense
    
    
    (874,316
    )
    
    
    (94,251
    )
    
    
    (2,060,986
    )
    
    
    (550,191
    )Total other income (expense),
net
    
    
    (240,326
    )
    
    
    (85,601
    )
    
    
    2,804,426
    
    
    
    (495,398
    )Loss before provision for income
taxes
    
    
    (2,269,825
    )
    
    
    (2,695,183
    )
    
    
    (3,640,321
    )
    
    
    (8,206,444
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    800Net loss
    
    
    (2,269,825
    )
    
    
    (2,695,183
    )
    
    
    (3,641,121
    )
    
    
    (8,207,244
    )Other comprehensive loss:Foreign currency translation loss
    
    
    (2,857
    )
    
    
    (1,236
    )
    
    
    (3,175
    )
    
    
    (2,030
    )Comprehensive loss
    
    $
    (2,272,682
    )
    
    $
    (2,696,419
    )
    
    $
    (3,644,296
    )
    
    $
    (8,209,274
    )Net loss per share:Basic
    
    $
    (0.05
    )
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.20
    )Diluted
    
    $
    (0.05
    )
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.20
    )Weighted average number of
common shares outstanding:Basic
    
    
    44,563,460
    
    
    
    43,443,732
    
    
    
    44,384,988
    
    
    
    41,987,614Diluted
    
    
    44,563,460
    
    
    
    43,443,732
    
    
    
    44,384,988
    
    
    
    41,987,614
 See accompanying notes to condensed consolidated financial statements
 4




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T3 MOTION, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Nine Months Ended September 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (3,641,121
    )
    
    $
    (8,207,244
    )Adjustments to reconcile net loss to net cash used in operating activities:Bad debt expense
    
    
    10,000
    
    
    
    3,000Warranty expense
    
    
    123,902
    
    
    
    314,462Depreciation and amortization
    
    
    273,603
    
    
    
    505,098Investor relations expense
    
    
    80,000
    
    
    
    Stock compensation expense
    
    
    1,260,866
    
    
    
    992,810Loss on sale of fixed asset
    
    
    
    
    
    
    1,607Change in fair value of derivative liability
    
    
    (4,862,598
    )
    
    
    Amortization of debt discount
    
    
    1,662,091
    
    
    
    425,161Change in operating assets and liabilities:Accounts and other receivables, net
    
    
    498,623
    
    
    
    (1,658,784
    )Inventories
    
    
    813,243
    
    
    
    (964,262
    )Prepaid expenses and other current assets
    
    
    31,789
    
    
    
    (418,268
    )Deposits
    
    
    (3,886
    )
    
    
    (3,146
    )Accounts payable and accrued expenses
    
    
    154,415
    
    
    
    1,286,208Net cash used in operating activities
    
    
    (3,599,073
    )
    
    
    (7,723,358
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of data license
    
    
    
    
    
    
    (1,000,000
    )Purchases of property and equipment
    
    
    (10,084
    )
    
    
    (512,726
    )Deposits on fixed assets
    
    
    
    
    
    
    (496,304
    )Loans/advances to related parties
    
    
    
    
    
    
    (77,297
    )Proceeds from sale of fixed assets
    
    
    
    
    
    
    2,200Repayment of loans/advances to related parties
    
    
    4,346
    
    
    
    2,909Net cash used in investing activities
    
    
    (5,738
    )
    
    
    (2,081,218
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from the sale of common stock and contributions from
stockholder, net
    
    
    
    
    
    
    6,669,163Deposit for preferred stock subscription
    
    
    1,250,000
    
    
    
    Proceeds from issuance of related party debt
    
    
    939,962
    
    
    
    Loans/advances from related parties
    
    
    
    
    
    
    200,000Payment of loans from related parties
    
    
    
    
    
    
    (1,819,990
    )Net cash provided by financing activities
    
    
    2,189,962
    
    
    
    5,049,173Effect of exchange rate on cash
    
    
    (3,175
    )
    
    
    (2,030
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,418,024
    )
    
    
    (4,757,433
    )CASH AND CASH EQUIVALENTS  beginning of period
    
    
    1,682,741
    
    
    
    4,932,272CASH AND CASH EQUIVALENTS  end of period
    
    $
    264,717
    
    
    $
    174,839SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest
    
    $
    14,096
    
    
    $
    66,003Income taxes
    
    $
    800
    
    
    $
    1,600Supplemental disclosure of non cash activities:Issuance of common stock for related party payables
    
    $
    1,536,206
    
    
    $
    Conversion of related party payable to related party notes payable
    
    $
    498,528
    
    
    $
    Conversion of accounts payable to note payable
    
    $
    199,829
    
    
    $
    Cumulative effect to retained earnings due to adoption of accounting standard
    
    $
    1,981,338
    
    
    $
    Cumulative effect to additional paid-in capital due to adoption of accounting standard
    
    $
    4,013,085
    
    
    $
    Cumulative effect to debt discount due to adoption of accounting standard
    
    $
    859,955
    
    
    $
    Debt discount and warrant liability recorded upon issuance of warrants
    
    $
    851,277
    
    
    $
    
 See accompanying notes to condensed consolidated financial statements
 5




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T3 MOTION, INC.
 
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE 1  DESCRIPTION OF BUSINESS
  Interim Unaudited Condensed Consolidated Financial Statements
   Going Concern
   Use of Estimates
  Concentration of Risk
  6




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Revenue Recognition
      Fair Value of Financial Instruments
  Segments
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenues:Domestic
    
    $
    1,122,407
    
    
    $
    2,122,992
    
    
    $
    2,715,653
    
    
    $
    5,220,476International
    
    
    43,452
    
    
    
    111,947
    
    
    
    693,173
    
    
    
    427,258Total net revenues
    
    $
    1,165,859
    
    
    $
    2,234,939
    
    
    $
    3,408,826
    
    
    $
    5,647,734
 Recent Accounting Pronouncements
 7




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##### Table of Contents



New Accounting Standard
 NOTE 2  INVENTORIES
  September 30,
    
    
    December 31,2009
    
    
    2008(unaudited)Raw materials
    
    $
    828,441
    
    
    $
    1,170,278Work-in-process
    
    
    69,269
    
    
    
    540,260Finished goods
    
    
    103,516
    
    
    
    103,931$
    1,001,226
    
    
    $
    1,814,469
 NOTE 3  PREPAID EXPENSES AND OTHER CURRENT ASSETS
  September 30,
    
    
    December 31,2009
    
    
    2008(unaudited)Prepaid inventory
    
    $
    311,858
    
    
    $
    355,720Prepaid expenses
    
    
    269,148
    
    
    
    257,075$
    581,006
    
    
    $
    612,795
 NOTE 4  INTANGIBLE ASSETS
    8




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Estimated
    
    
    September 30,
    
    
    December 31,Useful Life
    
    
    2009
    
    
    2008(unaudited)Geolmmersive License Agreement
    
    2 Years
    
    $
    1,000,000
    
    
    $
    1,000,000Less: Accumulated amortization
    
    
    
    
    
    
    (375,000
    )
    
    
    (375,000
    )$
    625,000
    
    
    $
    625,000
 NOTE 5  DERIVATIVE LIABILITIES
      September 30,
    
    January 1,2009
    
    2009Annual dividend yield
    
    
    
    Expected life (years)
    
    0.25-5
    
    1-5Risk-free interest rate
    
    0.40%-2.60%
    
    0.57%-1.67%Expected volatility
    
    84%-159%
    
    104%-159%
  9




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##### Table of Contents



Level 3
    
    
    Level 3Carrying Value
    
    
    Carrying ValueSeptember 30, 2009
    
    
    January 1, 2009(unaudited)
    
    (unaudited)Embedded conversion options
    
    $
    828,463
    
    
    $
    1,237,435Warrants
    
    
    2,013,322
    
    
    
    5,615,673$
    2,841,785
    
    
    $
    6,853,108Decrease in fair value
    
    $
    4,862,598
  Balance at December 31, 2008
    
    $
    Cumulative effect of adoption
    
    
    6,853,106Issuance of warrants
    
    
    851,277Change in fair value
    
    
    (4,862,598
    )Balance at September 30, 2009
    
    $
    2,841,785
 10




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NOTE 6  RELATED PARTY NOTES PAYABLE
  September 30, 2009
    
    
    December 31, 2008(unaudited)Note payable to Immersive Media Corp., 12%
interest rate, net of discount of $62,359 and $0,
respectively.
    
    $
    937,641
    
    
    $
    1,000,000Note payable to Vision Opportunity Master Fund,
Ltd., 10% interest rate, net of discount of
$1,079,410 and $1,213,402, respectively
    
    
    1,720,590
    
    
    
    986,598Note payable to Ki Nam, 10% interest rate, net
of discount of $119,501
    
    
    712,254
    
    
    
    $
    3,370,485
    
    
    $
    1,986,598
 Immersive Note
     Vision Opportunity Master Fund, Ltd. Bridge Financing
 December 2008  Financing
   11




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May 2009 Financing
    12




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Ki Nam Note
    NOTE 7  LOSS PER SHARE
  13




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NOTE 8  STOCK OPTIONS AND WARRANTS
 Common Stock Options
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock compensation expense  cost of revenue
    
    $
    29,329
    
    
    $
    36,572
    
    
    $
    95,400
    
    
    $
    109,801Stock compensation expense  sales and marketing
    
    
    84,777
    
    
    
    75,933
    
    
    
    263,215
    
    
    
    217,795Stock compensation expense  research and development
    
    
    49,652
    
    
    
    23,699
    
    
    
    153,897
    
    
    
    74,704Stock compensation expense  general and administrative
    
    
    260,803
    
    
    
    194,970
    
    
    
    748,354
    
    
    
    590,510Total stock compensation expense
    
    $
    424,561
    
    
    $
    331,174
    
    
    $
    1,260,866
    
    
    $
    992,810
  Weighted AverageNumber of
    
    
    Weighted Average
    
    
    Remaining Contractual
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Life (in years)
    
    
    Intrinsic ValueOptions outstanding as of January 1,
2009
    
    
    6,468,167
    
    
    $
    0.76Options granted
    
    
    160,000
    
    
    
    1.40Options exercised
    
    
    
    
    
    
    Options forfeited
    
    
    (472,478
    )
    
    
    0.78Options cancelled
    
    
    
    
    
    
    Options outstanding as of September
30, 2009
    
    
    6,155,689
    
    
    $
    0.77
    
    
    
    8.36
    
    
    $
    407,127Options exercisable as of September
30, 2009
    
    
    4,105,938
    
    
    $
    0.65
    
    
    
    8.21
    
    
    $
    316,042Options vested and expected to vest
as of September 30, 2009
    
    
    6,103,014
    
    
    $
    0.77
    
    
    
    8.36
    
    
    $
    404,779Options available for grant under the
Plan as of September 30, 2009
    
    
    1,294,311Weighted average fair value of options granted
    
    
    
    
    
    $
    1.23
  Options Outstanding
    
    
    Options ExercisableWeighted AverageExercise
    
    Number of
    
    
    Remaining Contractual
    
    
    Weighted Average
    
    
    Number of
    
    
    Weighted AveragePrices
    
    Shares
    
    
    Life (in years)
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price$0.60
    
    
    4,071,272
    
    
    
    8.21
    
    
    $
    0.60
    
    
    
    3,160,417
    
    
    $
    0.60$0.77
    
    
    1,000,000
    
    
    
    8.19
    
    
    $
    0.77
    
    
    
    875,000
    
    
    $
    0.77$1.40
    
    
    1,009,417
    
    
    
    9.10
    
    
    $
    1.40
    
    
    
    51,250
    
    
    $
    1.40$1.70
    
    
    75,000
    
    
    
    8.92
    
    
    $
    1.70
    
    
    
    19,271
    
    
    $
    1.706,155,689
    
    
    
    8.36
    
    
    $
    0.77
    
    
    
    4,105,938
    
    
    $
    0.65
 14




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##### Table of Contents



Warrants
  Weighted-AverageNumber of
    
    
    Weighted-Average
    
    
    Remaining Contractual
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Life (in years)
    
    
    Intrinsic ValueWarrants outstanding as of
January 1, 2009
    
    
    5,380,408
    
    
    $
    1.48Warrants granted
    
    
    702,047
    
    
    
    1.66Warrants exercised
    
    
    
    
    
    
    Warrants forfeited
    
    
    
    
    
    
    Warrants cancelled
    
    
    
    
    
    
    Warrants outstanding and
exercisable as of September 30,
2009
    
    
    6,082,455
    
    
    $
    1.50
    
    
    
    3.73
    
    
    $
    
 NOTE 9  COMMITMENTS AND CONTINGENCIES
 Warranties
     15




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##### Table of Contents



2009
    
    
    2008Beginning balance, January 1,
    
    $
    362,469
    
    
    $
    296,000Charged to cost of revenues
    
    
    123,902
    
    
    
    314,462Usage
    
    
    (217,087
    )
    
    
    (235,871
    )Ending balance, September 30
    
    $
    269,284
    
    
    $
    374,591
 Legal Contingency
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
  Indemnities and Guarantees
  NOTE 10  NOTE PAYABLE
  NOTE 11  RELATED PARTY TRANSACTIONS
  16




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##### Table of Contents



Accounts
    
    
    Related Party
    
    
    Related PartyReceivable/Advances
    
    
    Payables
    
    
    Notes PayableOpening balance at December 31, 2008
    
    $
    33,248
    
    
    $
    2,034,734
    
    
    $
    1,986,598Borrowings
    
    
    
    
    
    
    
    
    
    
    939,962Payments
    
    
    (4,346
    )
    
    
    
    
    
    
    Issuance of stock
    
    
    
    
    
    
    (1,536,206
    )
    
    
    Debt discount
    
    
    
    
    
    
    
    
    
    
    (851,277
    )Cumulative effect of accounting standard adoption  debt discount
    
    
    
    
    
    
    
    
    
    
    (858,683
    )Amortization of discount on debt
    
    
    
    
    
    
    
    
    
    
    1,662,091Conversion of related party payable to note
    
    
    
    
    
    
    (498,528
    )
    
    
    498,528Reclass of accrued interest to accrued expense
    
    
    
    
    
    
    6,734
    
    
    
    (6,734
    )Interest expense
    
    
    
    
    
    
    317,914
    
    
    
    Balance at September 30, 2009
    
    $
    28,902
    
    
    $
    324,648
    
    
    $
    3,370,485
 Accounts Receivable/Advances
   Prepaid Inventory
  Related Party Payables
    Interest Expense
   Related Party Notes Payables
  NOTE 12- DEPOSIT FOR PREFERRED STOCK SUBSCRIPTION
  17




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##### Table of Contents



NOTE 13- EQUITY
  Series
A Convertible Preferred Stock
         NOTE 14- SUBSEQUENT EVENTS
  Increase in Authorized Shares
  Series A Preferred Stock
  18




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This quarterly report on Form 10-Q contains certain statements that may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included in this report are forward-looking statements. When
used in this report, the words may, will, should, would, anticipate, estimate,
expect, plan, project, continuing, ongoing, could, believe, predict, potential,
intend, and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to risks and uncertainties that could cause actual results
to differ materially from those projected. These risks and uncertainties include, but are not
limited to, changes in sales or industry trends, competition, retention of senior management and
other key personnel, availability of materials or components, ability to make continued product
innovations, casualty or work stoppages at the Companys facilities, adverse results of lawsuits
against the Company and currency exchange rates. Forward-looking statements are based on
assumptions and assessments made by the Companys management in light of their experience and their
perception of historical trends, current conditions, expected future developments and other factors
they believe to be appropriate. Readers of this report are cautioned not to place undue reliance on
these forward-looking statements, as there can be no assurance that these forward-looking
statements will prove to be accurate. Management undertakes no obligation to update any
forward-looking statements. This cautionary statement is applicable to all forward-looking
statements contained in this report. Readers should carefully review the risks described in other
documents we file from time to time with the Securities and Exchange Commission (SEC), including
the recently filed Annual Report on Form 10-K for the year ended December 31, 2008.
 OVERVIEW
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Going Concern
   19




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##### Table of Contents



Concentration of Risk
   Revenue Recognition
      Fair Value of Financial Instruments
  Loss Per Share
  Legal Contingency
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
 20




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##### Table of Contents



Warranty
  Segments
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenues:Domestic
    
    $
    1,122,407
    
    
    $
    2,122,992
    
    
    $
    2,715,653
    
    
    $
    5,220,476International
    
    
    43,452
    
    
    
    111,947
    
    
    
    693,173
    
    
    
    427,258Total net revenues
    
    $
    1,165,859
    
    
    $
    2,234,939
    
    
    $
    3,408,826
    
    
    $
    5,647,734
 Derivative Liability
   21




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##### Table of Contents



Recent Accounting Pronouncements
 New Accounting Standard
 RESULTS OF OPERATIONS
 Three and Nine Months Ended September 30, 2009 and 2008
  Statement of Operations
 22




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Total revenues
    
    $
    1,165,859
    
    
    $
    2,234,939
    
    
    $
    3,408,826
    
    
    $
    5,647,734Cost of revenues
    
    
    1,224,988
    
    
    
    2,475,956
    
    
    
    3,947,002
    
    
    
    7,046,001Gross loss
    
    
    (59,129
    )
    
    
    (241,017
    )
    
    
    (538,176
    )
    
    
    (1,398,267
    )Operating Expenses:Sales and marketing
    
    
    486,127
    
    
    
    669,861
    
    
    
    1,483,281
    
    
    
    1,657,060Research and development
    
    
    364,258
    
    
    
    417,875
    
    
    
    963,119
    
    
    
    1,021,894General and administrative
    
    
    1,119,985
    
    
    
    1,280,829
    
    
    
    3,460,171
    
    
    
    3,633,825Total operating expenses
    
    
    1,970,370
    
    
    
    2,368,565
    
    
    
    5,906,571
    
    
    
    6,312,779Loss from operations
    
    
    (2,029,499
    )
    
    
    (2,609,582
    )
    
    
    (6,444,747
    )
    
    
    (7,711,046
    )Other income (expense):Interest income
    
    
    5
    
    
    
    7,144
    
    
    
    2,490
    
    
    
    54,824Other income (expense), net
    
    
    633,985
    
    
    
    1,506
    
    
    
    4,862,922
    
    
    
    (31
    )Interest expense
    
    
    (874,316
    )
    
    
    (94,251
    )
    
    
    (2,060,986
    )
    
    
    (550,191
    )Total other
income (expense), net
    
    
    (240,326
    )
    
    
    (85,601
    )
    
    
    2,804,426
    
    
    
    (495,398
    )Loss before provision for income tax
    
    
    (2,269,825
    )
    
    
    (2,695,183
    )
    
    
    (3,640,321
    )
    
    
    (8,206,444
    )Provision for income tax
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    800Net loss
    
    
    (2,269,825
    )
    
    
    (2,695,183
    )
    
    
    (3,641,121
    )
    
    
    (8,207,244
    )Other comprehensive loss:Foreign currency translation loss
    
    
    (2,857
    )
    
    
    (1,236
    )
    
    
    (3,175
    )
    
    
    (2,030
    )Comprehensive loss
    
    $
    (2,272,682
    )
    
    $
    (2,696,419
    )
    
    $
    (3,644,296
    )
    
    $
    (8,209,274
    )Net loss per share:Basic
    
    $
    (0.05
    )
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.20
    )Diluted
    
    $
    (0.05
    )
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.20
    )Weighted average number of
common shares outstanding:Basic
    
    
    44,563,460
    
    
    
    43,443,732
    
    
    
    44,384,988
    
    
    
    41,987,614Diluted
    
    
    44,563,460
    
    
    
    43,443,732
    
    
    
    44,384,988
    
    
    
    41,987,614
 Revenues.
 23




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##### Table of Contents



Domestic Revenues.
 International Revenues
 Cost of Revenues.
 Gross loss.
 Sales and marketing expense.
 Research and development.
 General and administrative.
 Total other income (expense)
 Net Loss
 24




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
    Cash Flows
 For the Nine Months Ended September 30, 2009 and 2008
    25




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. Controls and Procedures.
 Disclosure Controls and Procedures.
        26




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##### Table of Contents



Remediation of Material Weaknesses
  Changes in Internal Control over Financial Reporting
  
    
    We have hired additional professional accounting resources to assist with the review of
accounting policies and procedures and financial reporting with knowledge, experience and
training in the application of GAAP.
  
    
    We are in the process of further enhancing, the supervisory procedures that will include
additional levels of analysis and quality control reviews within the accounting and
financial reporting functions.
 
    
    We are in the process of strengthening our internal policies and enhancing our processes
for ensuring consistent treatment and recording of reserve estimates and that validation of
our conclusions regarding significant accounting policies and their application to our
business transactions are carried out by personnel with an appropriate level of accounting
knowledge, experience and training.
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 Preproduction Plastics, Inc. v. T3 Motion., Inc. Ki Nam and Jason Kim
  
 Item 1A. Risk Factors.
  27




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##### Table of Contents



If we are unable to continue as a going concern, our securities will have little or no value.
    
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
   
 Item 3. Defaults Upon Senior Securities.
 None
 
 Item 4. Submission of Matters to a Vote of Security Holders
   28




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##### Table of Contents



Item 5. Other Information.
 Amendment to Certificate of Incorporation
  Series A Convertible Preferred Stock
         29




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##### Table of Contents



Item 6. Exhibits.
 3.1
    
    Amended and Restated Certificate of Incorporation, as currently in effect (1)3.2
    
    Bylaws (1)3.3
    
    Amendment to Bylaws, dated January 16, 2009 (2)3.4
    
    Amendment to Certificate of Incorporation*3.5
    
    Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock*31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley of 2002 *31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley of 2002 *32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S. C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith.(1)
    
    Filed with the Companys Registration Statement on Form S-1, filed with the SEC on May 13,
2008.(2)
    
    Filed with the Companys Current Report on Form 8-K, filed with the SEC on January 20, 2009. 30




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##### Table of Contents



Date: November 16, 2009
    T3 MOTION, INC.(Registrant)By:
    /s/ Ki NamKi NamChairman of the Board and Chief Executive OfficerDate: November 16, 2009
    T3 MOTION, INC.(Registrant)By:
    /s/ Kelly AndersonKelly AndersonExecutive Vice President and Chief Financial Officer 31